How Can A Buyout Agreement Help Prevent & Resolve Partnership Disputes In Florida?
Partnerships can be efficient and effective business entities. Partners in business are required to put a lot of faith in each other. The sudden death, disability, or retirement of a business partner is a high risk period for disputes. A buyout agreement is one of the most useful tools for preventing and resolving these types of partnership disputes. Here, our West Palm Beach partnership disputes attorney explains how a buyout agreement can help prevent and/or resolve a partnership dispute.
Understanding Buyout Agreements: What is it and How Does it Work?
A buyout agreement is also frequently called a buy-sell agreement. It is a type of contract that pre-decides what will happen to each party’s ownership stake in a business should they suddenly leave the company. The Legal Information Institute explains that buyout agreements are used in a number of different contexts—with their “biggest role in partnership and corporate ownership contexts.” As with other types of commercial contracts, the specific terms of a buy-sell agreement always matter.
Buyout Agreements Can Help to Prevent Partnership Disputes
Partnership disputes can occur in a wide variety of different contexts. Business partners need to proactively work to prevent disputes throughout the course of their commercial relationship. At the same time, transition periods are one of the highest risk times for partnership disputes. When one partner is forced to leave the company unexpectedly—due to death, disability, personal financial problems, or other matter—there needs to be a plan in place for what will happen to their ownership stake in the business.
A buyout agreement is one of the best strategies for preventing partnership disputes over how a departing partner’s ownership stake will be handled. In most cases, a buyout agreement will give the other business partners the first right to purchase outstanding shares at a pre-set price or at a price with a preset formula. Notably, a buyout agreement may be “funded” through the purchase of life insurance coverage or another type of insurance coverage.
Buyout Agreement Can Help to Resolve Partnership Disputes
Buyout agreements can also be useful in another context. They offer a way to resolve an existing partnership dispute that simply cannot be handled in another manner. Some partnership disputes are so difficult—and cause so much damage to relationships—that the parties are no longer able to work together in an effective manner. A potential solution that preserves the ability of the partnership to continue its commercial operations is that one party can “buy” the other party out of the business. Negotiating a buyout to resolve a partnership dispute may be the best way to protect the rights and interests of all parties involved.
Consult With Our West Palm Beach Partnership Lawyer
At Pike & Lustig, LLP, we handle the full range of partnership disputes. If you have any specific questions or concerns about buyout agreements, our attorneys are more than ready to help. To set up a strictly confidential, no obligation consultation with a top commercial litigation attorney, please contact us today. Our law firm serves communities throughout South Florida.